CalPERS Makes $100MM Commitment to Bay Area Housing Development Fund

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OAKLAND,_CA,_USA_-_Skyline_and_BridgeBy Jon Peterson

California Public Employees Retirement System has approved a $100 million commitment into the AGI Resmark Housing Fund to invest in new apartment development projects in the nine-county San Francisco Bay Area.

[contextly_sidebar id=”aCclRb2Kdv4KbfOdfUjf76OFtg7vl9BS”]The Housing Fund will have San Francisco-based AGI Capital Group as the manager responsible for finding projects and Los Angeles-based Resmark Companies serving as the mentoring manager to AGI, according to a board meeting document from CalPERS. The pension fund did not respond to e-mails seeking comment for this story.

The total capitalization in the fund could reach as much as $370 million. “The leverage component for the fund will be as much as 70 percent,” said Patty Bartlett, chief operating officer for Resmark Impact Ventures, which is the emerging manager operation of Resmark.

“The Housing Fund will allow us to continue our investment strategy of finding apartment development sites, getting them entitled and building the projects, “ said Eric Tao, president of AGI Capital.

AGI Capital had a previous relationship with CalPERS. This was through Avant Housing, which was a venture with AGI Capital and San Francisco-based TMG Partners. The pension fund had also made a $100 million commitment to this partnership as well.

AGI Capital does see one new twist in the relationship with Resmark. “Under the venture with TMG, we had the idea that we would sell the properties to other institutional owners, and we were not considered to be long term owners. This is less likely to be the case with The Housing Fund. There could be a scenario played out that the projects that we build could be moved into another CalPERS account once they become a core asset,” said Tao.

The plan for the Housing Fund is to have a total of three projects located in the fund. One of these will be an asset that was transferred from the TMG partnership. This is the 259-unit project located at 1201 Tennessee Street in the Dogpatch neighborhood of San Francisco.

The plan is to break ground on this project within the next 30 days. “We are expected that this project will have a 19-month development timeline from start to finish,” said Tao.

AGI Capital is now looking at sites both inside and outside of San Francisco. One of these areas is Oakland. “This city has some interesting dynamics when compared to San Francisco. The construction costs in the two markets are roughly the same. Rents are 60 percent higher in San Francisco and land costs are 10 percent to 20 percent higher in San Francisco. There also is the fact that exit cap rates for apartments in Oakland are 25 to 50 basis points higher than in San Francisco,” said Tao.

Resmark is a big believer in the Bay Area apartment market. “This region is a job story. It has created very strong employment growth with a highly educated work force. The area also allows a limited amount of new development projects, and that is why we need someone like AGI Capital to find the sites to build on,” said Bartlett.

CalPERS has now allocated a total of $300 million to its emerging manager program. The other managers in the program include San Francisco-based Sack Properties for apartments and San Francisco-based Rubicon Point Partners to invest in office buildings and data centers.

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